Are you getting the most out of your credit card spending categories?
Sponsored By
CIBC
Are you using your cash back credit card to reap the most rewards? Find out how to strategize your spending and earn more.
Sponsored By
CIBC
Are you using your cash back credit card to reap the most rewards? Find out how to strategize your spending and earn more.
When it comes to average monthly household expenditures, after rent or mortgage costs Canadians spend the most on transportation, income taxes and food. Currently, there’s no credit card offering cash back on taxes (though we wager it would be an enormous hit) but you can get a return on many other of your expenses with the strategic use of a cash back card. Whether you’re hoping to take the edge off of your online splurges or looking for ways to harness the power of your everyday spending, read on for how to get the most out of your credit card spending categories.
Cash back credit cards do exactly what they say: They reimburse you a percentage of how much you spend with your card. Each card offers something slightly different, such as having no annual fee or offering a generous welcome bonus or extra perks or benefits. But before we dig into all that, you’ll want to look at the cash back structure of your card or the credit card you are applying for. These numbers will get you started earning.
In general, each time you use your cash back credit card, a certain percentage of your purchases will be returned to you in the form of cash or credit on your bill. The rate you earn back depends on the card.
While there are some cash back cards in Canada that return a flat percentage on every spend, the vast majority use spending categories to determine how much you will get back. A spending category refers to the type of purchase made and from where. For example, if you shop at a supermarket, your purchases may be classified in the “groceries” spending category. One thing to note is that credit card providers may categorize retailers differently. This is why one might classify a spend at a big retail chain store as “groceries” while another lists it under “department stores.” It’s worth knowing the categories for your cash back credit card.
Also, many credit cards offer rewards in tiers, putting bonus rates on certain spending categories. Top tiers will earn you the most back with lower tiers earning less. Don’t forget to check the card’s base rate. This is how much you will earn back on “all other purchases,” that is, spends not in a specific category. In effect, this is the least cash back you can earn using that card. A base rate of 0.5% is typical of a no-fee card.
Let’s break this down using these CIBC cash back cards.
Card | Rewards | Base rewards | Annual fee and interest rates |
---|---|---|---|
CIBC Dividend Visa Infinite | 4% on cash back on eligible gas, EV charging and grocery purchases, 2% on dining, transportation and recurring bills | 1% on all other purchases | $120
20.99% on purchases, 22.99% on cash advances (21.99% for Quebec residents), 22.99% on balance transfers |
CIBC Dividend Platinum Visa | 3% cash back on eligible gas, EV charging and grocery purchases, 2% cash back on eligible transportation, dining purchases and recurring payments | 1% on all other purchases | $99
20.99% on purchases, 22.99% on cash advances, 22.99% on balance transfers |
CIBC Dividend Visa | 2% cash back on eligible grocery purchases, and 1% cash back on eligible gas and EV charging, transportation and dining purchases | 0.5% on all other purchases | $0
20.99% on purchases, 22.99% on cash advances, 22.99% on balance transfers |
CIBC Dividend Visa for Students | 2% back on eligible grocery purchases, and 1% cash back on eligible gas and EV charging, transportation and dining purchases | 0.5% on all other purchases | $0
20.99% on purchases, 22.99% on cash advances, 22.99% on balance transfers |
While the above categories seem straightforward enough, know that there are limitations and conditions to each of the categories. Also, the welcome offers are for a limited time. To read the fine print, see cibc.ca for full details.
There are several strategies you can employ to make sure you make the most out the earn rates. Here’s how to prep yourself to choose the best card for your spending habits, and to make the most of what the card has to offer.
When it comes to choosing the best cash back credit card for you and your family, you’ve got to look at your spending habits and choose the card with the highest rates for your buying habits. This means reading the fine print and understanding what is and is not included in a certain category. For instance, with the above credit cards, “transportation” charges on the card include subway, streetcar, taxi, limousine and ride-sharing services like Uber or Lyft. Note that this is different from “gas,” purchases made at service stations or fuel dispensers, which has its own category.
In the end, it does pay to compare cards and build your budget with the right one.
Being versed on your spending categories will help you make lucrative spending decisions.
For example, sometimes a credit card will describe a category as “food and drink.” In its broadest sense, this could mean groceries, restaurants, food delivery, cafes, bars and lemonade stands. In reality, it’s probably less general. Understanding which purchases count in which categories is a key to maxing out your bonus cash back. The CIBC Cash Back Rewards program splits food and drink purchases into more specific categories, such as groceries as one classification and dining in another. And alcohol depends on where you purchased it, from a grocery store or an independent retailer or even a gas station.
Most cash back cards, namely those without an annual fee, carry a base rate of 0.5%. Getting more than that is a perk—one that can add up. If your “everything else” spending comes out to $150 monthly, and your card has a 0.5% base rate like the CIBC Dividend Visa you’ll get an annual return of $9. With a 1% base like the CIBC Dividend Platinum Visa that doubles to $18.
Credit card companies frequently run promotions for new customers, including welcome bonuses. Don’t underestimate these offers, as they can be extremely lucrative. For example, the CIBC Dividend Visa Infinite is offering new cardholders the chance to earn 10% cash back welcome bonus of up to $250 (first 4 statements). Offer not available to QC residents. Terms and conditions apply. If you’re planning on big spends, such as furniture or a road trip, getting a new credit card can be worth it.
If you’re looking to save some money on a new card, at first it might seem like a no fee card is the way to go. But you can’t truly determine that until you do a little math.
With the above four CIBC cash back credit cards, each lists groceries in their top-tier rewards and two of the cards also include gas. For these credit cards, the groceries category includes purchases at grocery stores and supermarkets. Spends at service stations and automated fuel bars make up the gas category. The no-fee cards cap their top-tier at 2% and only include groceries. Let’s imagine a $400 monthly spend which would net $8 cash back. Over a year, that’s $96 earned just from grocery purchases. Now, consider the CIBC Dividend Visa Infinite card with a $120 annual fee, which gives you 4% back on groceries and gas. With the same $400 on groceries, you’d earn $16 per month which is $192 per year—that’s $72 more than the annual fee. The lesson here? Don’t choose your card until you’ve crunched your spend numbers.
Mastering your spending categories is only one aspect of leveraging your cash back card. Other tips include:
Cash back cards are a great way to make the most of your spending. These tips we’ve shared can help you get more for your spending and in rewards.
This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers.
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It is certainly important to check which companies are included in a category to maximize the awards. However, it is ultimately determined by what the vendor classified themselves as. Recently, I questioned why I did not get a higher number of points for gas that I purchased with my credit card. I was informed that the vendor classified themselves as “other” to the credit card company. So, in order to get credited for a gas purchase, the business had to contact the credit card and get changed to “gas station”. Yeah….I’m sure the business is going to do that for me.